The February 2012 Fiscal Monitor reports a surplus of $1.6 billion for February 2012, compared to a deficit of $0.6 billion in February 2011.

For the eleven-month period ending February 2012, the deficit for the federal government was $14.5 billion, down $13.8 billion from the deficit of $28.3 billion reported in the same period in 2010-11. Budgetary revenues were up by $9.8 billion, primarily due to higher personal and corporate income tax revenues, while program expenses were down by $4 billion, due to lower “other transfer payments” and employment insurance benefits, partially offset by higher transfers to provinces and elderly benefits. Public debt charges were up marginally.

In the 2012 Budget, the Minister of Finance revised down the deficit forecast for 2011-12, from $31.0 billion in the November 2011 Economic and Fiscal Update to $24.9 billion, of which $3 billion was due to the elimination of the “adjustment for risk to revenues”. Most of the remaining improvement was due to lower “other transfer payments”. 

The 2012 Budget forecast an improvement for the year as a whole of $8.5 billion.  Yet the improvement to date is already $13.8 billion. This reflects lower-than-expected program expenses, as revenues are largely on track (there are offsetting differences among the components).  “Other transfer payments” are currently $5.8 billion lower in the April 2011 to February 2012 period than in the same period last year.  The 2012 Budget only forecast a decline of $2.8 billion for the year as a whole.

Last month, we indicated that the deficit for 2011-12 could be at least $2 billion lower than forecast in Budget 2012.  The February 2012 results indicate that it could easily be $4 billion lower. This would imply a final deficit of around $21 billion for 2011-12, provided there are no unexpected bookings for liabilities at year-end.